Operational time and a fundamental problem of insurance in a data‐rich environment

A problem of current concern in the assessment of claims experience in non-life insurance is addressed. The problem relates to the interface of two well-defined areas of actuarial activity, namely reserving and rating. A model is proposed that permits the analysis of claim settlement experience in such a way as to allow for variations in settlement rate, proportions of nil claims and variations from year to year in a risk-factorial background. From this, the reserving approach may be developed coherently into the area of risk costing for rating purposes.